2009 Developments in Arbitration: Consumer and Employment Arbitration

The year of of 2009 has seen no shortage of changes in the area of consumer and employment arbitration.

I. The Arbitration Fairness Act of 2009

A general sense seems to be emerging, among some at least, that arbitration may be going too far, and a legislative movement at the federal level has emerged that promotes the so-called Arbitration Fairness Act of 2009, which, if passed, would limit the use of binding arbitration in consumer, employment, franchise, and civil rights disputes. (Senate version: S. 931; Status. House version: H.R. 1020; Status) The American Bar Association (ABA) passed some resolutions with respect to the Arbitration Fairness Act as it relates to international commercial arbitration. (read more here)

II. Consumer Arbitration: The National Arbitration Forum

In a surprising move, the National Arbitration Forum (NAF) —the country’s largest administrator of credit card and consumer collections arbitrations— has agreed to step aside from the credit card and consumer debt arbitration business. (read more here and here) This agreement came only a few days after Minnesota’s Attorney General sued NAF on July14 alleging consumer, deceptive trade practices, and false advertisement. (read more here). Also, the law firm of Milberg LLP filed a class action suit against NAF. The Complaint alleges that NAF misrepresented its services as neutral. (read more here)

Following a U.S. Congressional Hearing on consumer arbitration held on July 22, (testimonies are here; videos are here) the American Arbitration Association (AAA) said (read more here) that it will not initiate arbitrations to collect from consumers until new guidelines are established. Soon after, JPMorgan Chase (read more here) and Bank of America (read more here) announced that they will no longer require mandatory arbitration on customers’ credit card disputes. In addition, Congress held a hearing on September 15th, titled “Mandatory Binding Arbitration – Is it Fair and Voluntary?” (testimonies are here)

III. Employment Arbitration: Jones v. Halliburton

Jones v. Halliburton Co. is an employment arbitration case with tragic facts that made the national headlines, including a story by the National Public Radio (NPR). (read more here) In this case, the Fifth Circuit held that claims for (1) assault and battery; (2) intentional infliction of emotional distress; (3) negligent hiring, retention and supervision of employees involved in a sexual assault; and (4) false imprisonment are not related to the plaintiff’s employment contract and refused to compel arbitration. (the case summary is here)

The Halliburton case prompted the U.S. Senate to pass the “Franken Amendment” to H.R. 3326, which bars funds to defense contractors who require workers to arbitrate “any claim under Title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision, or retention.” (Senator Franken’s video is here) H.R. 3326 was signed by President Barack Obama and became law on December 19, 2009. (final version is here; major actions are here)

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